Advaxis Inc. (NASDAQ: ADXS) traded up big after news broke that biotech giant Amgen Inc. (NASDAQ: AMGN) will become its partner. When investors see gains of 20% or more on news that is not quite a merger, they often wonder if the good news has been taken out of the stock. According to one analyst, Advaxis shares could still easily more than double, and that is after the huge gains seen on Tuesday.

Advaxis announced a global development and commercialization partnership with Amgen for the company’s ADXS-Neo. This deal could be worth hundreds of millions of dollars, and should more than validate Advaxis’ technology. Advaxis will still be responsible for manufacturing and clinical development, but Amgen will fund clinical and commercial costs.

Amgen is also taking a passive stake (8.9%) in Advaxis. There may be a reason here that Amgen decided to invest passively and to partner with Advaxis rather than just buying the company outright in a big premium buyout. Still, this may be a win-win for both companies.

The deal will potentially bring high-single digit royalties and up to mid-teen digit royalties on sales, and will have potential milestone payments of up to $475 million which Advaxis may collect. It is also worth noting that the intellectual property life of ADXS-Neo could extend out to 2035 — or longer.

A post-news research report from Janney showed that ADXS-Neo was actually not in the firm’s valuation model. It already had a fair value estimate of $22 ahead of this news. Now that target is being taken up to $26. The firm’s Roy Buchanan said:

We estimate that Advaxis has sufficient cash to fund operations into 2018. Our model for ADXS-Neo assumes sales start at $20M in 2020, ramping to $1B in 2025, with royalties paid to ADXS of 8% in 2020 and 15% in 2022 and beyond. We include $475M in potential milestones between 2020 and 2028 and discount at 35% through 2035 with no terminal value or probability-of-success adjustment.

Two other issues were brought up in the Janney report. One was that Amgen viewed as being smart on the deal. Another is the study progress views out to 2017. Buchanan’s report said:

The difference in level of difficulty of doing genetic manipulations in mammalian cells, particularly primary cells like patients’ T-cells for example, and doing so in bacteria is many orders of magnitude, in our estimation. There is relatively little novel science to be worked out in plasmid biology in bacteria. Combined with the natural adjuvant activity of the foreign bacteria, these advantages made the ADXS platform a natural fit for neo-epitope vaccines, we believe.

Management indicated trying to get an abstract into the SITC meeting in November for the phase 1/2 combo study of AXAL + durvalumab (AstraZeneca’s anti-PDL1 antibody) in cervical and H&N cancer, likely for the 1st dose escalation cohort. The 2nd dose escalation cohort recently completed treatment. Part B of that study will evaluate AXAL at 1×109 cfu (colony forming units) + 10mg/kg of durvalumab in ~90 patients with cervical cancer, randomized 1:1, durvalumab monotherapy vs. the combo. We expect that study could complete enrollment by YE. Part B of the ADXS-PSA / Keytruda phase 1/2 combo study in prostate cancer (KEYNOTE-046) could also complete enrollment this half. Phase 1/2 studies in HER2+ cancers and in anal cancer are actively enrolling and we speculate we could see updates before YE or in early 2017.

24/7 Wall St. wanted to see if any other fresh reports had been made after or shortly before this announcement. It turns out that Barclays reiterated its Overweight rating and $15 price target back on July 21. The firm noted that early results from ADXS-Neo could draw attention to this area and offer meaningful upside to Advaxis shares on top of its price target. Its $15 target was derived without this in the model either, stated as follows:

Advaxis announced that it had received FDA Fast Track designation for AXAL (Axalimogene Filolisbac) for the adjuvant treatment of high-risk locally advanced cervical cancer. We are encouraged by this additional recognition in addition to the recent special protocol agreement (SPA) with the FDA for its planned Phase 3 trial AIM2CERV. We believe this program has shown a dramatic turnaround from the short clinical hold last year; however the stock is only trading modestly above lows during that period. We continue to believe that Advaxis’ novel platform and multiple clinical applications are overlooked, and Advaxis shares undervalued.

Advaxis shares were last seen up 23% at $10.43 in mid-Tuesday trading. The 4.3 million shares at noon compared to an average daily volume of 685,000 or so. Advaxis already has a 52-week trading range of $5.21 to $22.20, and the consensus analyst price target is $22.50.

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Advaxis has a market cap of $358 million after the pop. That might imply that Amgen is paying for performance ahead rather than gambling a massive premium all at once, which would have been needed to pay for an Advaxis acquisition offer. Besides that, Advaxis shares already have been worth more than double the post-news price. Sometimes it is cheaper to invest and partner than it is to buy outright, and without all of the tail risks of whatever else may happen down the road.

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